In an unexpected twist, regular wages in the UK have surged by 6.0% in the first quarter of 2024 compared to the same period last year, outstripping forecasts and catching the eye of the Bank of England (BoE) as it contemplates an interest rate cut. Economists surveyed by Reuters had predicted a wage increase of 5.9%, slightly below the 6.0% rise seen in the three months leading up to February.
The BoE is closely monitoring the robust wage growth, assessing its potential to rekindle the high inflation rates the country has been battling. Despite a clear indication last week that rate cuts could commence as soon as June—from a 16-year peak of 5.25%—the bank remains vigilant.
This latest data, released on Tuesday by the Office for National Statistics (ONS), is one of two sets of labour market figures to be considered by the BoE ahead of its upcoming meeting. The overall wage bill, which includes more volatile bonus payments, also exceeded expectations, posting a 5.7% increase against an anticipated 5.5%.
Meanwhile, regular earnings in the private sector—a critical metric for the BoE—saw a slight decrease from 6.0% to 5.9% in the three months ending in February. Following the news, the pound sterling briefly strengthened against the US dollar.
This uptick in wages reflects broader economic trends and raises pertinent questions about the trajectory of monetary policy in the UK. As the BoE weighs its options, the robust wage growth presents both an opportunity and a challenge in its fight against inflation.
